Home office costs

Conditions

• Sole traders can use HMRC's simplified flat rate — £10/month for 25–50 hours worked from home, £18/month for 51–100 hours, or £26/month for 101+ hours (capped at £312/year) — or instead claim a fair proportion of actual costs (heating, electricity, rent, mortgage interest). This simplified method is only available to sole traders and partnerships, not limited companies.
• Limited company directors usually claim through a flat-rate allowance for household costs, or via a formal rental/licence agreement between the director and the company for actual costs.
• Employees can only claim tax relief if they are required to work from home, not where it is a personal choice.
• Any claim must reflect genuine business use only — the private-use portion is never allowable.

Common mistakes

• Claiming 100% of a household bill when the room is also used privately.
• Forgetting that selling the home later can have Capital Gains Tax consequences if a room is used exclusively for business.
• Employees assuming they can claim simply because they sometimes work from home by choice.

What to keep

• A record of hours worked from home each month if using the simplified rate.
• Copies of household bills and a clear, reasonable basis for the business proportion if claiming actual costs.
• Any rental or licence agreement between a director and their company.

Real-world example

A freelance designer works from a spare room roughly 25 hours a week. They use HMRC's simplified flat rate, which avoids having to apportion every bill and keeps the record-keeping light while still giving a reasonable deduction.

Frequently asked

Related allowances